Student loan overhaul doesn’t quite cut it
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If you’re like the majority of college students, at graduation, you will be handed more than a pretty piece of paper with calligraphy writing on it.
According to the Project on Student Debt, in 2008 the average college senior had $23,300 in debt.
In a lagging economy, graduating seniors will carry more than job search woes.
Being a conservative voter, I often find myself shuddering when I hear anything on the news that sounds like big government takeover. But the news about the government’s student loan overhaul hardly made headlines. It was packed quietly in the health care bill.
So, while Independents, Republicans and Democrats alike bickered on national television about what the health care bill would destroy or construct, provide or deny, college students (like you and I) were likely flipping the channel. Why? The news was too confusing, too complicated or too irritating.
Most of the nation ignored the Student Aid and Fiscal Responsibility Act during the heated talk about health care. This piece of legislation was passed with little to no deliberation. It was “small” in the shadow of the overall bill, which clogged our House and Senate for months.
Coming at the topic as if I were just a student with loans without a political predisposition, here are the facts.
Pros (according to supporters of the bill):
– The government gets to cut out the middlemen (banks) between the students and their funding.
– It’s supposed to save $60 billion within the next 10 years. That money will go to support Pell Grants. With more Pell Grants (which don’t have to be paid back) more low-income students will receive financial aid for college.
– It’s supposed to be easier for students to repay their loans. The cap for payment will be dropped to 10 percent of a students’ income (a 5 percent drop from the old system). Repayment should be less confusing.
– Some banks will still get “federal contracts” to service the student loans, according to the National Review.
– Private loans will still be available for students, but they will be significantly weakened by the legislation. Cons (according to naysayers):
– Cutting out the middlemen of private financial institutions puts the government in charge. (If the government can’t run the post office, how
can it possibly be responsible with student loans?)
– Stafford loans are eliminated. The funds will come directly from the government.
– Thousands of other bank employees could lose their jobs. An estimated 8,500 Sallie Mae employees (1/3 of its employees) will be let go due to the loss of business.
– Schools used to choose the lender (whether private sector or federal). Now, all schools will use the government as the lender.
– There will still be a gap between what loans are available to students and tuition cost.
– Students loans will be nationalized.
The Student Aid and Fiscal Responsibility Act shows how little the government is doing to alleviate the cost of higher education. The legislation will mean $200 more per year per eligible student in Pell Grants.
The money doesn’t go directly to students. It goes to the schools. Educational institutions have steadily increased tuition, leaving parents and students with greater financial struggle.
This may merely be a PR move as Obama faces consistently decreasing approval ratings. According to the College Board, the average tuition per year at a private four-year institution is more than $26,000.
The real issue is the cost of college. The government overhaul does not bring relief.